7 Tips for Buying a Bank-Owned Home

And when inventory goes down while demand remains the same, prices go up.

So, what is a homebuyer to do?

Buying a bank-owned home is a good alternative if you’re willing to deal with a small amount of risk. These homes usually sell for a cheaper price at auction.

But you don’t want to be stuck with buyer’s remorse after you’ve put down your bid and won.

Today we’re going to talk about how you can buy a bank-owned home with reasonable peace of mind.

1. Get Backup When Buying a Bank-Owned Home

One thing you need to know about bank-owned homes: the buyer usually works directly with the bank’s broker. In normal real estate transactions, you have a broker and the homeowner has a broker.

Commision is split between the brokers.

Being a bank’s broker is lucrative. And it means you know the bank owned market well.

If you can get a bank’s broker to back you up and work with you, you’re more likely to get more information on better deals. These brokers also know what is due to appear on the market. They can help you get a leg up on the competition.

2. Pre-approval or Better Yet, Cash

You want to make sure you have your financing in order before you approach a broker. Most of the bidders for the best homes will be investors who have cash.

The more cash you have to put down on a bank-owned home, the better your chances of winning the bid. But not only will your chances be better at auction, you will catch the eye of the broker as well.

3. Patience is Key

If you’re looking for a quick buy and want assurance you’ll end up with a house after negotiations, come in with cash or stay away from bank-owned homes.

Investors enjoy the bidding war when it comes to bank-owned homes. If you live in a smaller city, most investors will know each other and be bidding against each other.

You may not get the first house you bid on. But if you’re determined to get a bank-owned home, you might run through the bidding process several times before landing a good deal.

Don’t be tempted by the low initial bidding prices. You want to make reasonable offers. Otherwise, you will never win a bid.

You want to catch a property as soon as you can. This is why knowing a broker will get you places. Some investors bid on a property and buy it before even looking at the property.

That’s how hot these properties can be. But banks aren’t in it to make money. They’re in it to save money.

So whenever you get that breakthrough, you’ll get a great deal.

4. Inspections Will Save You in the End

Yes, there are some great bargains out there. But not all bank-owned homes are a bargain.

Many people trash their homes when they realize the bank will be taking it from them. Since some bank-owned properties are often sold as-is, you’ll want to know what you’re buying.

When buying a bank-owned home, get an appraisal and an inspection done like you would with a regular home. While you might be more lenient with a bank-owned home, there are some things you don’t want to buy.

For example, some owners will strip the house of any copper. The cost of replacing these parts could run you in the tens of thousands.

Some bank-owned homes are older than others. You might run into mold problems with some older homes. It’s a good idea to hire companies like FSG Inspections to inspect the home for mold and rot.

5. Be Prepared For Speed

Banks want these homes off their hands as quickly as possible. Despite the usually high volume of bank-owned homes on the market, the closing process is incredibly fast.

In fact, some banks are so interested in closing the deal fast that they add on fees for any delays in paperwork.

This is another reason why it’s best to use cash when buying a bank-owned home. You won’t have to wait for a lender’s underwriting team and risk the bank’s delay fees.

But how fast do bank-owned homes close? While you might have some negotiating room, banks won’t have much patience.

They will try to shorten the escrow period to 21 days if they can. Make sure that if you need a little more time, you stand firm on a timeline.

But don’t overdo it. If you’ve found the perfect property, you don’t want to jeopardize your find.

6. Don’t Expect the Bank to Repair a Thing

Again, these are sold as-is. With a typical consumer-owned property, you can negotiate repairs.

Inspections are useful for this.

But you don’t expect the same from a bank. You only pay for an inspection and appraisal to protect yourself from a bad deal. You can build in contingencies to get out of a bad deal if the appraisal and inspection come back with bad news.

7. Research and Be Wise

Buying a bank-owned home isn’t for the ignorant or the uninitiated. We don’t recommend first-time home buyers attempt to buy a bank-owned home.

But if you are a first time home buyer or it’s merely your first time buying a bank-owned home, do your research. Reading this article is only the first step.

Talk to investors in your area. Ask for advice.

Above all, be careful what you put your money into.

Bank-Owned Homes Are an Investment

Bank-owned homes can be a great investment. If you’re looking to flip a house or find a great deal, the foreclosed home is the best option.

Sometimes banks will advertise on classified sites. Start with our classified site to find your next awesome investment.